How does being a caregiver affect your finances?

Caregiving comes with out-of-pocket expenses

In the United States, 38.2 million people provide unpaid eldercare, and 70% also have jobs. Caregiving can cause financial strain from direct costs such as medical bills and equipment, as well as indirect costs such as lost wages and career interruptions. 

Research from the MIT AgeLab’s CareHive panel studied how these expenses can affect caregivers using a scale from 0.0 (not at all) to 1.0 (very much). 

How caregiving can affect retirement savings

Caregiving expenses can make saving for retirement difficult. There are some unique financial implications related to caregiving, including:

• Reduced income—You may work fewer hours, leave your job, or retire early, which can reduce the amount of money available to save for retirement.
• Decreased retirement contributions—Working less over time equals less money going into your 401(k) or IRA.
• Withdrawing savings—Taking money from retirement accounts to cover expenses can reduce your savings, and you may potentially incur penalties.
• Missing employer matching contributions—Leaving jobs or cutting hours can mean losing out on 401(k) matching contributions.
• Lower Social Security benefits—Reduced earnings over a career can lead to smaller benefits in retirement. 

Direct versus indirect financial costs of caregiving

Retirement planning for caregivers

Are you trying to balance work, caregiving, and saving for retirement? Here are some tips to consider that can help you stay on track.

• Work with a financial professional—A professional can help you create a plan to manage caregiving costs, prioritize paying off debt and saving, and help keep your retirement goals on track.
• Use educational tools and resources—Your company’s retirement plan website likely has financial education and wellness resources. Explore calculators, budgeting tools, and caregiver-focused articles or webinars to help build confidence in managing both caregiving and your finances.
• Leverage your workplace benefits—Check if your employer offers flexible schedules, remote work options, emergency backup care, employee assistance programs (EAP), or caregiver support groups—and use them.
• Build an emergency savings buffer—Open and fund a dedicated emergency savings account to handle unexpected caregiving expenses without derailing long-term savings.

Understand the cost of being a caregiver

The out-of-pocket and indirect costs of being a caregiver can strain your budget and make saving for retirement harder. With some planning, you can manage expenses while continuing to build your retirement savings. Taking small, consistent steps today can help support your financial well-being and keep your retirement goals on track. 

FAQs

What are the hidden costs of caregiving?          

The hidden costs of caregiving may include transportation, household expenses (rent, utilities, or insurance), paid services (adult day care, legal help, or home repairs), technology and safety devices, and personal products. Indirect costs, such as lost wages and career interruptions, can also quietly reduce your budget and savings.

How does caregiving affect retirement savings?  

Caregivers may need to work fewer hours, leave their job, or retire early, which means less money goes into their 401(k) or IRA, and they miss out on any employer-matching contributions. Some caregivers withdraw funds from their retirement accounts to cover costs, which may result in paying taxes or penalties. Lower lifetime earnings can also decrease Social Security benefits, making long-term retirement planning more challenging.

Do caregivers lose income or benefits?

Caregiving can mean fewer work hours, job changes, or early retirement, which lowers earnings and retirement contributions. You may also miss out on employer 401(k) matches. Over time, lower earnings may result in reduced Social Security benefits.

How much do family caregivers spend out of pocket?

On average, family caregivers spend about $7,200 per year on out-of-pocket expenses. These costs include medical supplies, transportation, home modifications, and various services and products that support daily care needs, all of which can strain household budgets.

How can caregivers support their retirement savings?

Caregivers should include related expenses in their budget and consider building an emergency savings buffer to avoid tapping into any retirement accounts. Maximize any employer match, even with smaller contributions. Look into workplace benefits (flex schedules, backup care, EAP), explore financial education tools, and work with a financial professional to help keep your goals on track.